F1 bosses say other sports show driver salary cap exploits can be prevented

2020 F1 season

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Formula 1 team bosses believe other sports have shown it is possible to enforce a cap on how much drivers are paid.

Teams have discussed how a limit on drivers’ pay can be introduced in future seasons, following the introduction of a cap on their budgets next year. However concerns have been raised that teams could find ways to circumvent any limit on what their drivers can earn, such as by having sponsors pay them directly.

But Haas team principal Guenther Steiner says some British and American sports have already successfully introduced similar rules.

“I think enough was learned about that in other sports,” he said. “In the UK it was in rugby.

“There’s a good precedent set there how to control that one, so that it isn’t circumvented. There will be rules in place for that.”

Under the proposed plans, teams would be allowed to spent up to $30 million on their two drivers, beyond which any further expenditure would be deducted from their budget cap. However the final details are yet to be agreed and no date for its implementation has been set.

Drivers, Circuit de Catalunya, 2020
F1 drivers salaries 2020
Some team principals, such as McLaren’s Andreas Seidl, are keen to see the same policy expanded to included the salaries of high-paid engineers and managers as well.

“We are supportive of the discussion to introduce a salary cap for the drivers,” he said. “I don’t see really a lot of negatives with it and I think there’s enough examples around us in other sports that it is actually feasible to introduce it.

“It’s just important, I think, that we do it also in parallel with introducing a cap on the top three salaries of each team. For us it’s simply the next logical step to do after we introduce the budget cap next year.”

The financial pressures arising from the pandemic make the introduction of a driver salary cap particularly important, says Seidl.

“We all know that we are facing challenging times at the moment in terms of financials. We also don’t know exactly how long this Covid situation is ongoing and the effect of it medium and long term, so that’s why we definitely support these discussions.”

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Dieter Rencken
Dieter Rencken has held full FIA Formula 1 media accreditation since 2000, during which period he has reported from over 300 grands prix, plus...
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  • 32 comments on “F1 bosses say other sports show driver salary cap exploits can be prevented”

    1. Todd (@braketurnaccelerate)
      10th November 2020, 7:41

      But why though?

      This isn’t baseball where teams are spending $300m+ per year on players. There’s literally 2-4 drivers who may ever qualify for a salary cap during a given year. This is extremely inconsequential to be pursuing and a bit of a finger to those few drivers. Even with a cap, the small teams are still never going to spend $30m/year on drivers. Also it isn’t going to magically make the likes of Hamilton, Verstappen or Vettel go to poor old Williams or HAAS. They will still want to be in the best cars, which coincidentally are the teams that can afford to pay the ‘luxury tax’ of a contract to these drivers.

      1. It sounds then like one of many baby steps to get a fair playing field. We all know how terrified F1 is of disturbing the status quo.

        1. Todd (@braketurnaccelerate)
          10th November 2020, 20:15

          But how’s it leveling the field? Truth is, F1 doesn’t have 20 drivers who are worth $15m a piece. Even if we add in all of the good drivers who aren’t in F1 right now, we still come up short. If we go with a $25m/5m split between a number 1 and number 2 driver, then it gets even worse for filling out the number 1 seats. There’s like 5-6 active or ‘available’ drivers who I can think of who might be worth that amount.

          But again, only the top 3-5 teams are even going to field drivers who don’t bring some type of backing…

          So where are these good drivers coming from that are going to level the playing field?

          1. @braketurnaccelerate as you note, we have a bit of a disconnect between what people seem to want and how the cap is meant to achieve that.

            For example, we have the comment about how these are “baby steps to get a fair playing field”, but no explanation for how that is supposed to be the case – it is thrown out there simply as a statement of fact by AliceD, without any real logic or argument given to it. What exactly is supposed to be achieved by the cap and whom exactly is the cap meant to benefit?

            Personally, I think too many are pinning too much hope on the future rule changes being more transformative than they actually are, ranging from this proposal for the salary cap to the proposed technical rule changes too.

            As an aside, Steiner’s comparison with Rugby Union is not really a great example either – whilst Saracens have already been penalised, there is another club currently under investigation for overspending (currently not yet named by the Rugby Football Union), so it seems that there are multiple clubs bending the rules.

            Furthermore, there were allegations that the RFU was, at least in the past, tacitly allowing overspending to occur – it was noted that, both in 2010 and 2016, the RFU did investigate a number of clubs and found that they were breaking the salary caps. However, since it turned out that the vast majority of clubs were breaking the rules, the RFU was accused of basically finding it easier to ignore the issue and to allow the rules to be broken instead of enforcing it.

      2. There was a time when other sports’ players were only getting paid 100 million, there was a time it was 10 million. There was a time it was under a million.

        There was a time Ajax Amsterdam could win the Champion’s League and have the best players, and now there’s a time where they’re celebrated for even making it out of the group league and the only ones viable of winning the thing are the top teams of one of the four leagues.

        It’s a chicken and the egg thing, really. Yes, you can say “the best drivers will go the the best teams,” but how can a team get better if they can never get or keep the best drivers? With the budget cap coming in for development, hopefully we’ll have more teams being able to build a race winning and WDC competitive car (think Jordan GP 98-99), then at least let them have a fighting chance of getting and keeping the best drivers in those seats without seeing them all go to the wealthy teams after a successful season.

        1. Todd (@braketurnaccelerate)
          10th November 2020, 20:38

          Relating to other sports doesn’t work though. Because in those other sports, the athletes (and coach(es)) are the only thing that makes those teams good. With a budget cap system, any team can go out and buy the best athletes if they want, and have the best team. Look at all of the ‘super’ teams in the NBA recently. Also, in other sports, athlete wages are the albatross, and make up the largest part of a team’s expenditures.

          But in future F1, you will still have an entire $140m/yr engineering dept which will make or break a team, and there’s nothing a driver’s salary budget cap can do about that—just look at Ferrari this year. A team budget cap is the equivalent to budget caps in the NBA, NFL, etc.

          With the budget cap coming in for development, hopefully we’ll have more teams being able to build a race winning and WDC competitive car

          I think too many people are relying on this to be a magic pill for Formula 1. At the end of the day, the biggest/best teams are still going to be the biggest/best teams. Sure we’ll get a random team that produces a really good car every now and then (Lotus ’12-13), but if you look at what brings teams up or down the grid, it’s ultimately leadership and engineers.

      3. Agreed @braketurnaccelerate.

        I don’t see the point in this at all. The market will naturally determine what wage is sustainable for drivers, if Mercedes want to pay Hamilton $100m per year, go for it. It won’t make him drive any faster.

        $100m spent on R&D, design, engineering, manufacture, that’s different story.

        1. Oh ye of Blessed Reasoning

      4. Well, when we have a bugdet cap of 145 million that will be 140 by 2022 and going down every year, a team like Mercedes could be spending 40-50 Million (a whopping third of their budget) on top of that for drivers. And Red Bull and Ferrari will also be spending about 20-25% of the cap on salaries, with McLaren and Renault not being that far back in all likelyhood @braketurnaccelerate.

        And those % would be going UP with the budget cap lowering. If you add to that the top 3 engineers/managers, it could end up where almost half of the budget a team spends is outside the budget cap, which doesn’t make sense.

        1. @bascb

          a team like Mercedes could be spending 40-50 Million (a whopping third of their budget) on top of that for drivers.

          So what?

          1. a whopping third of their budget

            @f1osaurus – it was in the text. Since it is a considerable part of the budget, it makes sense to cap it when they cap the budget to keep the sport healthy

            1. @bascb And again a whopping “Who cares?” It was in the text!

              It makes sense to keep the playing field level so the cars don’t deviate too much in performance. So yes a cap on spending on the cars makes sense. That’s why the distinction was made. Who cares how much the teams spend on their pay drivers?

            2. Who cares how much the teams spend on their pay drivers?

              I guess that should be “spend on their drivers pay” since the point of pay drivers is that the team does not spend, but GET money from them @f1osaurus ;-)

              But to the merit of what you were arguing – Who cares? Well, the other teams care. And (potential) team owners care, since it defines how much they need to bring to be able to compete. And because of that, in the end the F1 and the FIA both have to care for the sake of the sport. To have a budget cap that covers only up to 2/3rds of the cost to compete does not make sense.

        2. @bascb do the new budgets include driver salaries? I can’t see that being the case as Red Bull, Ferrari, Mercedes, McLaren, Renault would have objected to be able to attract talent to their teams.

          1. That is exactly what this is about @freelittlebirds, adding a gap that includes driver salaries, since they are NOT (nor are the top 3 managers/engineers) currently included in the cap they agreed on.

            Most teams wouldn’t be able/willing to afford to pay drivers that kind of money (anymore), so they are all fine with capping the amount a team like Mercedes or Ferrari can dole out to a driver.

            1. @bascb There’s no discussion to be had. The top 3 people and the drivers should not be a part of the cap. Obviously, Toto should make 5-10 times more then Steiner does and Lewis should be making 10-20 times more than Magnussen.
              This is a cap on success which has nothing to do with F1 and it goes completely against its DNA. If this is logical why not cap victories, poles and championships or lap times?

              Sorry, Lewis you’re too quick – do a 1 second slower lap to match Bottas, you’ve hit your lifetime pole cap!

              Bottas, you’re quicker than Charles, please slow down before you get a black flag.

              Max move slower over the finish line so Charles can win the race – we’ve hit our cap of laps led for the weekend!

              Like I said, the drivers should come up with their own caps and suggestions. After all, they hold all the strings. No drivers, no F1… I’d understand if the teams had any bargaining position but they really don’t. We can count the number of good drivers in the world on your fingers… We can count the number of people who can replace execs well into the thousands.

            2. All those things you mention ARE Capped. There is only 1 championship to be won. And the calender sets the cap on wins and poles.

              A sport has rules that define how participants can take part. They put a limit on the people who can be in the pits to do a pitstop, the amount of cars a team can have, the amount of tyres a team can use and the amount of energy that can be used. And they limit the design of the cars to fall within some restrictions. Now they also put a spending cap in place.
              All of these rules are there to make it a more or less fair competition. Otherwise, the one with the biggest bag of money can buy a lot of success. There is no reason why anyone should be able to buy the better drivers, the better top engineer etc just because they found a richer billionaire to foot the bill for a vanity project. In any sport.

              I am wholly convinced that Mercedes would be winning even if they had the same budget as most other teams. Lewis would still want to drive the fastest car. And Wolff would still want to be at the helm. Just like Newey would be as interested in designing the fastest car. They aren’t in there for the money anyway.

    2. Drivers wages are subject to the rules of supply and demand. A salary cap is just an illusion. If a team needs a good driver and the only way to get one is to “bypass” the rules, then that’s what they’ll do. Conversely, if there is a surplus of drivers then why do you need a surplus cap? If there’s a restriction on the ability of people to become F1 drivers, which there is at this time, then the supply dwindles and the price goes up. If the rules change so there are more F1 drivers then the supply increases and the price goes down. F1 are the ones who control the supply of drivers to teams.
      The question isn’t what other sports do, the question is what F1 wants to do. If F1 wants to pay their drivers huge amounts then they’ll control the supply of drivers to the teams so as to achieve that; conversely if F1 wants to pay a more modest amount then they’ll increase the availability of drivers so as to achieve the more modest salary.

    3. Under the proposed plans, teams would be allowed to spent up to $30 million on their two drivers

      Combined?

      That’s going to lead to some very interesting and potentially explosive situations where superstar driver A is earning $20m+ and driver B comes into the team on a lower salary but ends up delivering equal/better performance.

      What do team bosses do? Dock driver A’s salary the following season and risk losing them to another team or continue to pay driver B less and risk losing them instead?

      I suppose the resulting pay gap isn’t dissimilar to what happens at Mercedes / Red Bull currently, but it effectively forever rules out ever having a double superstar driver pairing again.

      1. Or am I being cynical? I mean Max would take a $10m pay cut to drive at Mercedes right? Right?

        (Or vice versa – not trying to start a driver comparison)

    4. Driver salary cap is not Haas’ problem. They have a slow car.
      What is the use of a driver salary cap when you still employ a lot of pay drivers in F1.
      F1 always missing the plot as usual.

      1. Haas’ problem is that whilst they paid their drivers well below the proposed cap it was still much more than they were worth.

    5. I am not sure how this plan is workable in practice. A salary cap system can only really work across a much larger number of employees rather than just 2. Doing a salary cap over such a small number of employees will just lead to friction between those employees since everyone can work out everyone else’s salary.

      The obvious unintended side effect is that the top teams will end up with a clear number one driver with a cheap rookie (or even free if pay driver) as the number two, therefore further reducing overall competition for victories as fewer of the best drivers are in the best cars.

      If they must do a salary cap then just include the numbers within the overall cap and be done with it. At least then teams can decide whether spending an extra $10m on a driver will deliver better performance than $10m in R&D. Would be interesting to see since I bet the driver would prove to be the better investment.

      The notion that superstar drivers won’t race if they have to take big pay cuts just doesn’t wash with me, they have no other series that can pay them the money they will be looking for and they are unlikely to find alternative employment matching their existing salaries.

    6. Here’s a great idea. Why not cap the salaries of F1 mgmt to the US President’s salary? 400k is more than enough for anyone to make any living, right? :)

      Then we drop the 2nd salary to the Vice President’s and subsequent salaries to Senators’. These guys don’t have to run for office and they do what they love so any dollar they make is really just a bonus:).

      Who can possibly need more than a US Senator to live in luxury?

      Everyone’s happy, payrolls drop massively, Newey and just about everyone quits F1:) and the sport thrives!!! Mateschitz, Ron Dennis and Luca Di Montezrmolo are hired at minimum wage to change the tires during pit stops. Haas will, of course, bring the Don who will make pit stops great again!

    7. Good to see F1 focusing on the real problems. If a team is going to make 100 million in F1 and they choose to pay a driver 150 million, why should anyone outside of the team try to stop them? And if that team can get a sponsor to pay the driver’s 150 million salary, more power to them, because it’s clearly a business decision that is likely going to be worth more than the salary. I don’t understand why they think that the salaries of any employee should be scrutinized and limited.

      1. @velocityboy I know right? And what is this supposed to achieve anyway? Half the field runs with pay drivers and the top teams don’t care either. Only Renault and McLaren would care, but why cripple the drivers income just to placate a two wannabe teams?

    8. If you’re going to cap drivers salaries then everyone’s salaries should be capped. If you want to be fair then a fixed percentage of F1 profits should be set aside for drivers salaries. Then everyone shares in the successes and failures. Why chose only the drivers to punish.

    9. I don’t really see the point in this, teams struggling financially won’t be paying their drivers anywhere close to a salary cap. If they want to make driver distribution more equitable they should limit the amount of time a team can retain the same two drivers to two or three years. I don’t think this would be a good idea, but it would be better than a salary cap

    10. The writing/journalism here is really going down hill.

      Yet another example of imagining a misplaced notion that something needs to be “fair” and then just drum that drum from only that perspective.

      Simply saying it cannot be circumvented means nothing. The only way that could realistically be done is by stopping drivers from having personal sponsors. Which would mean even more senseless restrictions on driver income.

      Then to refer to Rugby as an example is even more daft. Simply looking this up on Google for 5 seconds shows that these rules include: “two Excluded Players whose salaries sit outside the cap”.

      Why is that? “enabling clubs to recruit and retain world class talent”. Hmmm, might that apply for F1 too?

      Then drag in this nonsense about the pandemic. How is that even relevant? First of all, it’s not even close to 2023 yet. Then the teams are perfectly capable to negotiate with their drivers. If they are having financial issues then they work out their next contract with lower pay.

      1. Rugby is a terrible example of a salary cap working well. Saracens, the team which has dominated the English sport for the last few years was basically disqualified from the premiership because it had been sneaking past the salary cap for its big name players. I won’t go into detail but it involved the club owner buying some players expensive property.

        The upshot is Saracens’ many titles are now utterly tarnished now their cheating has been exposed in addition to the game losing its top team (they are relegated and many players have lost their jobs). It’s as if Mercedes had been found they had been using illegal driver aids for the last 7 years – would they retrospectively have their titles removed? How would that make red bull/ferrari feel? In rugby, Exeter were the perennial runners-up to saracens and though they are now the dominant force, their fans are a bit bitter about all that success they were essentially robbed of.

    11. I am sceptical of budget and salary caps, there will be so many ways to circumvent this, if someone tries.

      So lets say I drive for Mercedes. Mercedes doesnt pay me directly, but to a company (or trust) I’ve set up. On paper, the Mercedes F1 team pays my company 15 million a year (lets say including all bonuses) for driving services rendered. Further to this, Diamler AG and Petronas pay me 15 million a piece annually for my image rights and brand ambassadorship. So that leaves my company/trust with a 45 million dollar income for the year. This is before my personal sponsors have paid for sporting their logos on my hat.

      Will this type of arrangement contravene the salary cap?

      As I’ve also point out before, with budget caps, in big organisations like Ferrari, Mercedes, Alpine etc, there some many ways to transfer costs to other departments. Red Bull Racing (and AT I believe) for example procure engineering services from Red Bull Technologies, which is a stand alone company. Is RBT subject to the auspices of F1’s auditors?

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